Late payment of invoices in the UK: your rights, statutory interest and how to get paid faster

Late payment is one of the most common causes of cash flow strain for UK small businesses. The work is done, the invoice is sent, and the money you are relying on for wages or suppliers simply does not arrive.

You have more leverage than it often feels. UK law gives you clear rights, and a few habits make late payment far less likely in the first place.

Key takeaways: without agreed terms, a UK business invoice is generally late after 30 days; you can usually claim statutory interest at 8% above the Bank of England base rate plus fixed compensation; clear written terms and fast, polite chasing prevent most problems; if slow payers are squeezing cash flow, invoice finance or a revolving facility can bridge the gap.

When is a business invoice legally late in the UK?

If you have not agreed payment terms, a business-to-business invoice is generally late 30 days after the customer receives the invoice or the goods or services, whichever is later.

Where you have agreed terms in writing, those terms apply. The rules set limits on very long terms: for business-to-business contracts, terms over 60 days must be fair to both parties, and public sector bodies are generally expected to pay within 30 days. GOV.UK has a clear summary of the current position, and it is worth checking before you rely on a specific figure.

These rights come from the Late Payment of Commercial Debts (Interest) Act 1998, often shortened to the Late Payment Act. They apply to transactions between businesses. They do not cover sales to consumers.

How much late payment interest can I claim?

You can usually claim statutory interest at 8% a year above the Bank of England base rate on the unpaid amount, from the day after it fell due.

The base rate used is the reference rate in force on 30 June or 31 December, whichever came most recently before the debt became late. It is fixed for that debt, even if the base rate changes afterwards. Check the current base rate on the Bank of England website and the rules on GOV.UK before you calculate a claim.

Statutory interest is simple interest, meaning it is calculated on the original debt only, not on interest already added. Here is a worked example. The base rate used below is an assumption for illustration, not a forecast or the current figure.

In this illustrative case the extra sum is modest, but on larger or repeatedly late invoices it adds up. More importantly, simply knowing you can claim changes the tone of a payment conversation.

What fixed compensation can I add to a late invoice?

On top of interest, you can claim a fixed sum that depends on the size of the debt.

The fixed sum is intended to cover the cost of recovering the debt. If your reasonable recovery costs are higher, for example because you used a collection agency, you may be able to claim the difference as well. You can usually claim compensation once per invoice.

Do I need to put late payment terms on my invoices?

Your statutory rights apply whether or not you mention them, but stating them clearly makes late payment less likely.

The law gives you the right to interest and compensation automatically on qualifying business debts. In practice, customers pay more attention when the terms are in front of them. A good invoice includes:

• An exact due date, such as 14 November, rather than just 30 days.
• Your full bank details and a clear payment reference.
• The purchase order number, if your customer uses them. Missing PO numbers are a common excuse for delay.
• A short line noting that you reserve the right to claim interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998.
• The name and email of the person to contact with any query.

You can also agree a contractual interest rate instead of the statutory one, as long as it is a substantial remedy. Agree it in writing before work starts.

How can I stop customers paying late in the first place?

Check new customers before you extend credit, and structure large jobs so less money is at risk at any one time.

Prevention is cheaper than chasing. A few checks at the start of a relationship make late payment much less likely, and none of them need to feel unfriendly.

• Look up limited company customers on Companies House to see whether accounts are filed on time and who the directors are.
• Use a credit reference agency report for larger contracts, and set a credit limit for each customer.
• Ask for a deposit or staged payments on big or long-running jobs, so you are never owed the full value at once.
• Complete your customer's supplier set-up forms promptly, as missing details are a common cause of delay.
• Offer easy payment methods, such as a payment link on the invoice.
• Review payment behaviour every quarter and tighten terms for customers who are consistently slow.

Late payment by customers also has knock-on effects on your own record. If slow receipts push you into paying suppliers or HMRC late, that can show up on your credit profile. How to build your business credit profile explains why paying on time yourself matters.

How do I chase a late payment without damaging the relationship?

Chase early, politely and on a predictable schedule, so it feels like process rather than confrontation.

Most late payment is not deliberate. Invoices get lost, approvers are on holiday, or a supplier set-up form was never completed. A calm, consistent routine resolves most of these quickly.

1. Agree payment terms in writing before you start work, and find out who approves payments at your customer.
2. Invoice the same day the work is delivered, with an exact due date.
3. Send a friendly reminder a few days before the due date.
4. Chase the day after the due date, by email and phone, and ask whether anything is holding payment up.
5. Follow up weekly, keeping a written record of every contact.
6. After 30 days overdue, send a firmer letter setting out the amount, including interest and compensation you are entitled to claim.
7. If there is still no payment, send a formal letter before action giving a final deadline.

Many businesses mention their right to claim interest rather than actually adding it, and use it as leverage for prompt payment in future. Whether to claim is a commercial judgement about each customer.

What happens if a customer still won't pay?

You can pursue the debt formally, usually starting with a letter before action and then a court claim if needed.

A letter before action sets out what is owed, why, and the date by which you will start proceedings if it is not paid. Courts expect you to have tried to settle the matter first. If that fails, smaller debts in England and Wales can often be claimed online through the government's Money Claim Online service. Scotland and Northern Ireland have their own procedures. Check GOV.UK for current fees and financial limits.

Other routes include mediation, a debt collection agency or, for undisputed debts owed by a limited company, a statutory demand. These carry costs and consequences, so it is sensible to take legal advice before escalating.

If the late payer is a larger business, the Office of the Small Business Commissioner can look at payment complaints from small suppliers in some circumstances. Large companies must also publish their payment practices under the government's reporting duty, which can tell you how quickly a prospective customer tends to pay before you sign a contract.

How can I stop late payments hurting my cash flow?

Build a buffer, forecast conservatively, and have a funding option in place before you need it.

The businesses that cope best with late payment assume some invoices will arrive late and plan for it. A rolling 13-week cash flow forecast, which maps expected money in and out week by week, shows the pinch points early. Our post on seasonal cash flow planning walks through building one, and cash flow gaps and VAT quarters covers the extra squeeze around tax dates.

Where good customers pay reliably but slowly, invoice finance can release a large share of an invoice's value soon after you raise it, rather than waiting weeks for payment. Invoice finance explained sets out how it works and what it costs. For less predictable gaps, a revolving credit facility lets you draw funds when needed and repay when customers pay.

Finance is a tool for timing gaps, not a fix for customers who never pay. Credit-checking new customers and asking for deposits on large jobs remain the first line of defence.

Are the UK late payment rules changing?

The government has announced plans to strengthen the rules, so check GOV.UK for what is currently in force.

In recent years the government has consulted on and announced measures aimed at tackling late payment to small businesses, including proposals on maximum payment terms and stronger powers for the Small Business Commissioner. Some changes require new legislation and may take time to come into effect. Before relying on any specific limit or right, read the latest guidance on GOV.UK.

How Rook Bristol can help

Rook Bristol offers invoice finance, revolving credit and business loans from £10,000 to £1 million, over terms of up to 60 months, to UK-registered businesses with at least six months of trading and £10,000 or more in monthly turnover. Our UK team can talk through whether funding fits your situation, or whether better credit control would solve the problem on its own.

You can apply online or contact us with questions. All finance is subject to status.